Banking Current Affairs 2018

Welcome to Banking Current Affairs 2018 Section of GKToday. This section has current affairs on banking industry for IBPS Banking Recruitment, RBI Grade B, SBI PO, RRB and other banking examinations. An E-book compilation of latest 300 Banking Current Updates can be downloaded from This Link

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Public sector banks to come out of PCA framework by end of 2018: Government

Union Government is expecting that public sector banks (PSBs) placed under RBI’s Prompt Corrective Action (PCA) framework will come out of it by the end of this year. As many as 11 out of 21 state-owned banks are currently under PCA framework.

Reasons

Operational performance of PSBs has improved in April-June 2018 quarter, with steep reduction in net losses, increase in recoveries and significant improvement in provision coverage ratio. Besides, government is also providing PSUs adequate capital when required.  Some of capital already has been given, as recoveries is taking place and there is possibility that some banks will not need it. As of now, there no bank is breaching regulatory norms prescribed by RBI.

Prompt corrective action (PCA) framework

PCA framework is supervisory tool of RBI, which involves monitoring of certain performance indicators of banks to check their financial health as early warning exercise and to ensure that banks don’t go bust. Its objective is to facilitate banks to take corrective measures including those prescribed by RBI, in timely manner to restore their financial health. It also provides opportunity to RBI to pay focussed attention on such banks by engaging with management more closely in those areas.

PCA framework is invoked on banks when they breach any of three key regulatory trigger points (or thresholds). They are capital to risk weighted assets ratio, net non-performing assets (NPA) and Return on Assets (RoA). Depending on risk thresholds set in PCA framework, banks are put in two type of restrictions, mandatory and discretionary depending upon their placement in PCA framework levels. The mandatory restrictions are on dividend, branch expansion, directors compensation while discretionary restrictions  include curbs on lending and deposit.

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Banks Board Bureau hires Egon Zehnder, Hay Consultants to develop strategies

Banks Board Bureau (BBB) has appointed two firms Egon Zehnder International Pvt. Ltd and Hay Consultants Pvt. Ltd to assist in developing strategies for top bank management.

Key Facts

Egon Zehnder was appointed as knowledge partner to design, implement and institutionalise a flagship leadership development strategy for state-run banks in India. Hay Consultants was appointed to assess leadership competencies and potential capabilities of people appearing for post of whole time directors in state-run banks. Their expertise will help to bring in experienced professionals as whole-time directors is part of  focus to ensure more effective monitoring of decisions taken by state owned bank management.

Comment

The appointment two consultants to assist BBB is indication of growing stress on leadership skills in public sector banks (PSBs). Their appointment comes at a time when state-run banks have been struggling to appoint quality people in top management. It also comes at a time efforts are being made by government and Reserve Bank of India (RBI) to revive PSBs suffering from huge levels of non-performing assets (NPAs) and losses.

Banks Board Bureau (BBB)

BBB is autonomous body of Central Government tasked to improve governance of Public Sector Banks (PSBs), recommend selection of chiefs of government owned banks and financial institutions and help banks in developing strategies and capital raising plans.

It was announced by Union Government in August 2015 as part of seven point Indradhanush Mission to revamp PSBs and started functioning in April 2016. It had replaced Appointments Board of Government. It is housed in Reserve Bank of India’s (RBI) central office in Mumbai, Maharashtra.

It comprises eminent professionals and officials for public sector banks (PSBs). Current BBB Chairman is Bhanu Pratap Sharma. The first BBB was set up in February 2016 under chairmanship of former CAG Vinod Rai for two-year term that ended in March 2018

Functions of BBB

  • Give recommendations for appointment of full-time Directors as well as non-Executive Chairman of PSBs.
  • Give advice to PSBs in developing differentiated strategies for raising funds through innovative financial methods and instruments and to deal with issues of stressed assets.
  • Guide banks on mergers and consolidations and governance issues to address bad loans problem among other issues.

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